What Stays On Your Credit Report And For How Long?

What Stays On Your Credit Report And For How Long?

A credit report is a specific document that shows your history with creditors and has a considerable effect on your future financial abilities. Possessing a ‘good’ credit report is typical provided that you pay your bills and debt repayments in a timely manner. Having said that, skipping a repayment on a bill or debt repayment can cause substantial problems if you want to gain credit again down the road. In recent times, the rules have been altered to place a greater focus on constructive history such as paying your bills in a timely manner, but overwhelmingly, credit reports are used as a means for creditors to evaluate your abilities to repay a loan by looking for any financial errors you’ve made in the past. If you have made some financial oversights, how long does this information stay on your credit report? What kinds of financial errors are more severe than others? This article will examine these questions to give you a better understanding of how these documents work.

What Do Credit Reports Consist of

The following will itemise the type of information that is generally found on your credit report:
Personal Information for example your name, address, DOB and driver’s licence details
Joint applicant details if you’ve received credit jointly with another individual
Credit card information
Arrears brought up to date, for instance, any overdue or unpaid debts that have since been settled
Defaults and other infringements for instance missed minimum credit card repayments and loan repayments which are in excess of 60 days overdue
All credit applications
Debt agreements for example bankruptcy, personal insolvency, and court judgements
Repayment history which is likely the most critical aspect of your credit report. It covers all credit accounts like home loans, car loans, personal loans and credit card loans. Any missed repayments will feature information such as the due date, paid date, amount, and any partial payments if applicable
Commercial credit applications such as any business or commercial loan applications
Report requests which lists all the creditors who have previously requested a copy of your credit report1

Credit Report Defaults

Defaults with lenders will be noted on your credit report and will alter your capacity to acquire credit in the future, so it’s imperative to understand what constitutes a default on your credit report. If you fail to make a payment on a debt, your financial institution has the ability to report your debt to a credit reporting agency who will then register this information on your credit report. With that being said, loan providers can only do this if the following terms apply:

The default amount is $150 or more;
You’re a ‘confirmed missing debtor’ or ‘clearout’ which signifies the lender cannot contact you because you have changed your phone number and address;
The debt is 60 days or more overdue; and
The lender has requested you to pay the debt by either sending you written notice in the mail, or by asking you over the phone1
Your financial institution must advise you of any intentions in lodging a report prior to doing this. Generally, your contract or service agreement will detail when a default can be made and reported to a credit reporting agency.

How Long Does A Default Stay On My Credit Report

In most cases, a credit default will remain on your credit report for 5 years, but if a lender cannot contact you because you’ve changed your telephone number and address (referred to as ‘clearout’), the penalties are more serious and the default will continue to be on your credit report for 7 years. It is necessary to bear in mind that even when you do settle an overdue debt, the default will continue to stay on your credit report, but the status will be updated to reflect that the debt has been repaid. Any time you apply for a loan, the loan provider will always review your credit report first and if there are any defaults, the loan provider can reject such loan applications. If this is the case, the lender must advise you that your application has been rejected based upon your bad credit history.

As you can see, credit reports are serious documents that can substantially impact your borrowing capability and financial flexibility. In the majority of cases, credit reports are either a pass or a fail, so any default, despite how big or small, will be specified on your credit report for five years. While there are measures to improve your credit rating (for instance paying your bills in a timely manner), creditors are really only interested in any defaults on your credit report and can reject a loan application based on a single default. If anything, this article highlights the importance of paying your bills and debt repayments on schedule, so if you end up with any financial challenges and can’t pay your bills by their due date, get in touch with Bankruptcy Experts Hobart on 1300 795 575 for assistance, or visit their website for more information: http://www.bankruptcyexpertshobart.com.au